Francesco,
It would be good if you take a look of the first chapters of "Stochastic
Frontier Analysis" Subal, C Kumbhakar, C Lovell (2004). I remember something
called COLS that it seems like FE estimation. What Frontier (Coelli
software) and -xtfrontier- does is RE. Also William Green has some paper in
the area that could be downloaded at his webpage.
Rodrigo.
----- Original Message -----
From: <[email protected]>
To: "Francesco D'Amico" <[email protected]>
Cc: <[email protected]>
Sent: Tuesday, February 06, 2007 10:28 AM
Subject: Re: st: xtfrontier fixed and random
Random effects is the default choice for the idiosyncratic error term (I
have no idea about the fixed effects - i.e. if it is feasible to use dummies
for the fixed effects or not). However, I suggest you to move to package
Frontier 4.1 (or subsequent versions, if they exist) by Tim Coelli (you
should find it at http://www.une.edu.au/econometrics/cepa.htm or something
like that). It is a few hundred kilobytes, it is provided for free, it is
easy-to-use, it has a small manual with some examples that are very useful
and just a bit of the underlying statistics, and I regret to say that I
found it to be better than Stata ('s official command for panels). In
particular, Frontier 4.1 let you express the technical inefficiency term as
a linear combination of some variables. INEXPLICABLY, Stata (just-updated,
Intercooled, version 9.2) let you do this only for the cross-sectional
command -frontier-, but not for the panel counterpart -xtfrontier-. In the
latter command, the inefficiency term can be only a random variable with
truncated-normal distribution, or a random variable with truncated-normal
distribution multiplied by a specific function of time (exponential decay).
Please remember that, if you need not to be bound to use only 1 output
measure (dependent variable), or a specific functional form for the
production frontier, you may use data envelopment analysis (not available on
Stata to my best knowledge, but a program, DEAP, should be provided on the
same webpage). However, a major weakness of data envelopment analysis is
that it is deterministic, i.e. it does not distinguish between technical
inefficiency and noise. Moreover two-stage estimation (i.e., calculation of
efficiency scores and regression of these scores against exogenous
variables) is problematic.
Nicola
At 02.33 06/02/2007 -0500, you wrote:
>I'm beginning to work with xtfrontier and i was wondering to know in
>which way i can impose a fixed-effects or a random-effects panel model.
>Thanks everybody.
>Francesco
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